SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
|
Date
of report (Date of earliest event reported)
|
May
1, 2008
|
|
INTERNATIONAL
FLAVORS & FRAGRANCES INC.
|
|
(Exact
Name of Registrant as Specified in
Charter)
|
|
New
York
|
1-4858 | 13-1432060 |
|
(State
of or Other Jurisdiction
of
Incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer
Identification No.)
|
|
521
West 57th
Street, New York, New York
|
10019 |
|
(Address
of Principal Executive Offices)
|
(Zip Code) |
|
Registrant’s
telephone number, including area code
|
(212)
765-5500
|
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions (see General Instruction A.2.
below):
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Item
2.02. Results of Operations and Financial Condition
Attached
and being furnished hereby as Exhibit 99.1 is a copy of a press release of
International Flavors & Fragrances Inc. ("IFF" or the "Company") dated May
1, 2008 reporting IFF's financial results for the quarter ended March 31,
2008.
Non-GAAP
financial measures: To supplement the Company's financial results presented in
accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), the
Company uses, and has also included in the attached press release or as part of
its web cast, certain non-GAAP financial measures. These non-GAAP financial
measures should not be considered in isolation, or as a substitute for, or
superior to, financial measures calculated in accordance with GAAP. These
non-GAAP financial measures as disclosed by the Company may also be calculated
differently from similar measures disclosed by other companies. To ease the use
and understanding of our supplemental non-GAAP financial measures, the Company
includes the most directly comparable GAAP financial measure.
The
Company discloses, and management internally monitors, the sales performance of
international operations on a basis that eliminates the positive or negative
effects that result from translating foreign currency sales into U.S. dollars.
Management uses this constant dollar measure because it believes that it
enhances the assessment of the sales performance of its international operations
and the comparability between reporting periods.
The
Company uses a non-GAAP financial operating measure which excludes a
restructuring charge. The Company also uses a non-GAAP financial measure which
excludes the benefits of tax rulings relating to prior years. Management
believes that given the unique nature of these items, including information
without the impact of these items may be more representative of the Company's
core operational performance and effective tax rate, as applicable, and may
assist investors in evaluating the Company's period to period financial results
in a manner consistent with how management evaluates such results. A material
limitation of these financial measures is that such measures do not reflect
actual GAAP amounts, a restructuring charge includes actual cash outlays, and
tax benefits reflect an actual accounting and cash benefit realized. Management
compensates for such limitations by clarifying that these measures are only one
operating metric used for analysis and planning purposes and by providing the
corresponding GAAP financial measure on IFF’s website at www.IFF.com in the
"Investor Relations" section.
Item
9.01. Financial Statements and Exhibits
(d) Exhibits
| 99.1 | Press Release of International Flavors & Fragrances Inc., dated May 1, 2008. |
SIGNATURE
Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
| INTERNATIONAL FLAVORS & FRAGRANCES INC. | |||
|
Dated:
May 1, 2008
|
By:
|
/s/ Douglas J. Wetmore | |
| Name: | Douglas J. Wetmore | ||
| Title: | Senior Vice President and Chief Financial Officer | ||
Exhibit
99.1
International Flavors & Fragrances
Inc.
IFF
REPORTS FIRST QUARTER 2008 RESULTS
New York, NY May 1, 2008 -
International Flavors & Fragrances Inc. (NYSE: IFF), a leading global
creator of flavors and fragrances for consumer products, today announced sales
of $597 million, a 5 percent increase from first quarter
2007. Reported sales benefited from the weaker U.S. dollar, mainly
against the Euro. At comparable exchange rates, sales would have
increased 1 percent compared to the prior year period.
Earnings
per share as reported were $.69 in both the first quarter of 2008 and
2007. The 2008 first quarter results include pre-tax restructuring
charges of $6.2 million or $.06 per share related to employee separation costs
due to the elimination of approximately 125 positions in support
functions. Excluding these charges, earnings per share would have
been $.75, a 9 percent increase over the same period last year.
Operating
profit for the quarter was 16.0 percent of sales, including the pre-tax
restructuring charges of $6.2 million, compared to 16.8 percent in the prior
year period.
“We are
very pleased with the continued strength of our Flavors business, which has
delivered market share growth for seven consecutive quarters,” commented Robert
M. Amen, Chairman and Chief Executive Officer. “Our Fragrance
business results were mixed. Functional Fragrance sales were strong
in Asia and Europe, although this performance was offset by weakness in Global
Fine Fragrance and North America Functional Fragrance sales.
“Despite
the challenging U.S. economic environment, which we anticipate will continue for
some time, we remain confident about our growth prospects—particularly in the
emerging markets—and our ability to deliver on our financial
goals.”
Flavors Business
Unit
Flavor
sales increased 12 percent over first quarter 2007 due to market share gains
from new wins and volume growth of existing business. Growth was
especially strong in Latin America and Asia. Excluding the impact of
currencies, sales growth for Flavors was up 8 percent.
Fragrance Business
Unit
In
comparison to first quarter 2007, Fragrance sales were flat, primarily because
strong growth in the Greater Asia and European regions was offset by weak demand
for fragrances in North America.
Fragrance
Ingredient sales were 6 percent lower due to weaker demand in North America and
Europe and a planned shift in product mix to enable gross margin
improvement.
First Quarter 2008
Overview
§ Gross
profit, as a percentage of sales, was 41.1 percent compared with 41.8 percent in
the prior year quarter. This decrease was mainly the result of the decline in
North America sales, which impacted absorption of manufacturing expenses, most
notably in fragrance compounds. Product mix, mainly lower sales of
fine and beauty care compounds, and some impact of higher material costs also
effected margins; the average cost of raw materials increased 4 percent over the
prior year quarter.
§ Research
and Development spending, as a percentage of sales, was 8.7 percent, higher than
the 8.2 percent in the first quarter 2007, and equal to the rate of spend for
the full year 2007.
§ Selling
and Administrative expenses, as a percentage of sales, declined to 15.1 percent
as compared to 16.1 percent in the first quarter of 2007. The 2008
expenses included the benefit of a $2.6 million insurance recovery related to a
2005 product contamination matter.
§ Interest
expense totaled $18 million as compared to $8 million in 2007, due to higher
borrowings incurred in connection with the 2007 accelerated share repurchase
program. Average cost of debt was 5.9 percent for 2008 compared to
4.1 percent in 2007.
§ The
Company’s first quarter effective tax rate was 25.4 percent compared to 28.0
percent in the prior year quarter. The 2008 first quarter benefited from
favorable tax rulings with respect to prior periods; excluding the benefit of
these favorable rulings, the effective tax rate for the first quarter would have
been 28.2 percent.
§ Average
number of diluted shares (in thousands) was 81,253 compared to 90,658 in the
prior year quarter.
About International Flavors
& Fragrances Inc.
IFF is a
leading creator of flavors and fragrances used in a wide variety of consumer
products and packaged goods. Consumers experience these unique scents
and tastes in fine fragrances and beauty care, detergents and household goods,
as well as beverages, confectionary and food products. The
Company leverages its competitive advantages of brand understanding and consumer
insight combined with its focus on R&D and innovation, to provide customers
with differentiated product offerings. A member of the S&P 500
Index, IFF has sales, manufacturing and creative facilities in 31 countries
worldwide. For more information, please visit our Web site at www.iff.com.
Individuals
interested in receiving future updates on IFF via e-mail can register at http://ir.iff.biz.
Audio Web
Cast
An audio
Web cast, to discuss the Company’s first quarter 2008 financial results and
outlook, will be held today at 9:00 a.m. ET. Interested parties can
access the Web cast, accompanying slide presentation, press release, Generally
Accepted Accounting Principles (GAAP) reconciliation and Form 10-Q on the
Company’s Web site at www.iff.com, under
the “Investor Relations” section. For those unable to listen to the
live broadcast, a replay will be available on the Company’s Web site
approximately
one hour after the event and will remain available on the IFF Web site until May
15, 2008.
2
Cautionary Statement Under
The Private Securities Litigation Reform Act of 1995
Statements
in this quarterly release, which are not historical facts or information, are
"forward-looking statements" within the meaning of The Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are based on
management's current assumptions, estimates and expectations. Certain of such
forward-looking information may be identified by such terms as "expect,"
"believe," "outlook," "guidance," "may," and similar terms or variations
thereof. All information concerning future revenues, tax rates or
benefits, interest savings, earnings and other future financial results or
financial position, constitutes forward-looking information. Such
forward-looking statements involve significant risks, uncertainties and other
factors. Actual results of the Company may differ materially from any
future results expressed or implied by such forward-looking
statements. Such factors include, among others, the following:
general economic and business conditions in the Company's markets, including
economic, inflationary and recessionary pressures, high energy and commodity
price, decline of the U.S. dollar, population health and political
uncertainties; interest rates; the price, quality and availability of raw
materials; the Company's ability to implement its business strategy, including
the achievement of anticipated cost savings, profitability and growth targets;
the impact on cash and the impact of increased borrowings related to the July
2007 share repurchase program; the impact of currency fluctuation or devaluation
in the Company's principal foreign markets and the success of the Company's
hedging and risk management strategies; the outcome of uncertainties related to
litigation; the impact of possible pension funding obligations and increased
pension expense on the Company's cash flow and results of operations; and the
effect of legal and regulatory proceedings, as well as restrictions imposed on
the Company, its operations or its representatives by U.S. and foreign
governments. The Company intends its forward-looking statements to
speak only as of the time of such statements and does not undertake or plan to
update or revise them as more information becomes available or to reflect
changes in expectations, assumptions or results.
Any
public statements or disclosures by IFF following this report that modify or
impact any of the forward-looking statements contained in or accompanying this
report will be deemed to modify or supersede such outlook or other
forward-looking statements in or accompanying this report.
Investor
Contact: Yvette Rudich
Director
of Corporate Communications
212-708-7164
Media
Contact: Melissa Sachs
Manager,
Corporate Communications
212-708-7278
3
International
Flavors & Fragrances Inc.
Consolidated
Income Statement
(Amounts
in thousands except per share data)
(Unaudited)
|
Quarter
ended March 31,
|
||||||||||
|
2007
|
2008
|
%
Change
|
||||||||
|
Net
sales
|
$ | 566,101 | $ | 596,605 | 5 | % | ||||
|
Cost
of goods sold
|
329,382 | 351,123 | 7 | % | ||||||
|
Gross
margin
|
236,719 | 245,482 | 4 | % | ||||||
|
Research
& development
|
46,632 | 52,056 | 12 | % | ||||||
|
Selling
and administrative
|
91,271 | 90,149 | -1 | % | ||||||
|
Amortization
|
3,556 | 1,538 | -57 | % | ||||||
|
Restructuring
and other charges
|
- | 6,222 | ||||||||
|
Interest
expense
|
8,314 | 18,219 | ||||||||
|
Other
expense (income), net
|
(167 | ) | 2,307 | |||||||
|
Pretax
income
|
87,113 | 74,991 | -14 | % | ||||||
|
Income
taxes
|
24,424 | 19,043 | -22 | % | ||||||
|
Net
income
|
$ | 62,689 | $ | 55,948 | -11 | % | ||||
|
Earnings
per share - basic
|
$ | 0.70 | $ | 0.70 | - | |||||
|
Earnings
per share - diluted
|
$ | 0.69 | $ | 0.69 | - | |||||
|
Average
shares outstanding
|
||||||||||
|
Basic
|
89,378 | 80,296 | -10 | % | ||||||
|
Diluted
|
90,658 | 81,253 | -10 | % | ||||||
4
International
Flavors & Fragrances Inc.
Consolidated
Condensed Balance Sheet
(Amounts
in Thousands)
(Unaudited)
|
December
31,
|
March
31,
|
|||||||
|
2007
|
2008
|
|||||||
|
Cash
and cash equivalents
|
$ | 151,471 | $ | 60,458 | ||||
|
Short-term
investments
|
604 | 706 | ||||||
|
Receivables
|
450,579 | 508,167 | ||||||
|
Inventories
|
484,222 | 512,034 | ||||||
|
Other
current assets
|
103,602 | 98,775 | ||||||
|
Total
current assets
|
1,190,478 | 1,180,140 | ||||||
|
Property,
plant and equipment, net
|
508,820 | 523,420 | ||||||
|
Goodwill
and other intangibles, net
|
732,836 | 731,298 | ||||||
|
Other
assets
|
294,654 | 305,997 | ||||||
|
Total
assets
|
$ | 2,726,788 | $ | 2,740,855 | ||||
|
Bank
borrowings and overdrafts
|
$ | 152,473 | $ | 152,869 | ||||
|
Other
current liabilities
|
386,423 | 365,120 | ||||||
|
Total
current liabilities
|
538,896 | 517,989 | ||||||
|
Long-term
debt
|
1,060,168 | 1,071,342 | ||||||
|
Non-current
liabilities
|
510,527 | 568,373 | ||||||
|
Shareholders'
equity
|
617,197 | 583,151 | ||||||
|
Total
liabilities and shareholders' equity
|
$ | 2,726,788 | $ | 2,740,855 | ||||
5
International
Flavors & Fragrances Inc.
Consolidated
Statement of Cash Flows
(Amounts
in thousands)
(Unaudited)
|
March
31,
|
March
31,
|
|||||||
|
2007
|
2008
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
income
|
$ | 62,689 | $ | 55,948 | ||||
|
Adjustments
to reconcile to net cash provided by operations:
|
||||||||
|
Depreciation
and amortization
|
21,139 | 19,494 | ||||||
|
Deferred
income taxes
|
11,695 | 21 | ||||||
|
Loss
(gain) on disposal of assets
|
(815 | ) | 72 | |||||
|
Equity
based compensation
|
4,277 | 3,885 | ||||||
|
Changes
in assets and liabilities:
|
||||||||
|
Current
receivables
|
(38,454 | ) | (34,802 | ) | ||||
|
Inventories
|
1,648 | (4,897 | ) | |||||
|
Current
payables
|
(62,771 | ) | (48,814 | ) | ||||
|
Changes
in other assets
|
2,591 | (12,023 | ) | |||||
|
Changes
in other liabilities
|
1,147 | 28,757 | ||||||
|
Net
cash provided by operations
|
3,146 | 7,641 | ||||||
|
Cash
flows from investing activities:
|
||||||||
|
Net
change in short-term investments
|
(277 | ) | (115 | ) | ||||
|
Additions
to property, plant and equipment
|
(8,590 | ) | (11,966 | ) | ||||
|
Purchase
of (proceeds from) investments
|
4,380 | (3,784 | ) | |||||
|
Proceeds
from disposal of assets
|
452 | 471 | ||||||
|
Net
cash used in investing activities
|
(4,035 | ) | (15,394 | ) | ||||
|
Cash
flows from financing activities:
|
||||||||
|
Cash
dividends paid to shareholders
|
(18,764 | ) | (18,628 | ) | ||||
|
Net
change in bank borrowings and overdrafts
|
1,903 | (36,568 | ) | |||||
|
Proceeds
from issuance of stock under stock-based
|
||||||||
|
compensation
plans
|
15,764 | 2,314 | ||||||
|
Excess
tax benefits on stock options exercised
|
1,732 | - | ||||||
|
Purchase
of treasury stock
|
(31,480 | ) | (29,995 | ) | ||||
|
Net
cash used in financing activities
|
(30,845 | ) | (82,877 | ) | ||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
431 | (383 | ) | |||||
|
Net
change in cash and cash equivalents
|
(31,303 | ) | (91,013 | ) | ||||
|
Cash
and cash equivalents at beginning of year
|
114,508 | 151,471 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 83,205 | $ | 60,458 | ||||
6
International
Flavors & Fragrances
Q1
2008 Segment Profit
(Amounts
in Thousands)
(Unaudited)
|
Three
Months Ended March 31, 2008
|
||||||||||||||||
|
Global
|
||||||||||||||||
|
(DOLLARS
IN THOUSANDS)
|
Flavors
|
Fragrances
|
Expenses
|
Consolidated
|
||||||||||||
|
Net
sales
|
$ | 273,807 | $ | 322,798 | - | $ | 596,605 | |||||||||
|
Operating
profit
|
$ | 56,928 | $ | 46,896 | $ | (8,307 | ) | $ | 95,517 | |||||||
|
Interest
expense
|
(18,219 | ) | ||||||||||||||
|
Other
income (expense), net
|
(2,307 | ) | ||||||||||||||
|
Income
before taxes
|
$ | 74,991 | ||||||||||||||
|
Three
Months Ended March 31, 2007
|
||||||||||||||||
|
Global
|
||||||||||||||||
|
(DOLLARS
IN THOUSANDS)
|
Flavors
|
Fragrances
|
Expenses
|
Consolidated
|
||||||||||||
|
Net
sales
|
$ | 243,442 | $ | 322,659 | - | $ | 566,101 | |||||||||
|
Operating
profit
|
$ | 44,814 | $ | 58,868 | $ | (8,422 | ) | $ | 95,260 | |||||||
|
Interest
expense
|
(8,314 | ) | ||||||||||||||
|
Other
income (expense), net
|
167 | |||||||||||||||
|
Income
before taxes
|
$ | 87,113 | ||||||||||||||
7